Rishi Sunak says Liz Truss could put UK into 'inflation spiral'

Tory leadership front-runner is facing scrutiny about her financial plans from a number of influential politicians

The winner of the Conservative Party leadership contest between Liz Truss and Rishi Sunak, one of whom will be named Britain's new prime minister, will be declared on September 5. PA

Liz Truss must choose between her unfunded £50 billion ($59bn) tax cuts or providing cost-of-living support — or risk plunging the economy into an “inflation spiral”, Rishi Sunak has warned.

The foreign secretary would increase borrowing to “historic and dangerous levels”, and place public finances in to “serious jeopardy”, if she attempts both, the Tory leadership candidate said.

Mr Sunak made the comments after Ms Truss, the front-runner to be the next UK prime minister, signalled she could help firms and households with rising energy bills with direct support this winter.

She was looking at assistance “across the board”, despite in the past insisting she was focused on tax cuts rather than what she termed “giving out handouts”.

"Liz's plans are promising the earth to everybody. I don't think you can have your cake and eat it. I don't think life is that simple, and I think her plan risks making everything worse," he said on Monday.

Ms Truss has argued that tax cuts will help to grow the UK's economy and boost prosperity.

The former chancellor also fuelled speculation that he may decline to serve in any Truss administration if defeated, as he suggested that ministers need to agree with a prime minister on the "big things".

Ms Truss, who is the frontrunner to replace Boris Johnson as prime minister, was urged to be more transparent with her plans for an emergency budget to address the cost-of-living crisis.

Mr Sunak insisted he is receiving a "warm reception" while campaigning even as he acknowledged that some Tory Party members are still angry at him for quitting Mr Johnson's Government.

The former chancellor said: "If I actually spent all my time looking at the polls or reading newspapers, I probably wouldn't get out of bed in the morning to do all these things."

The Sunak campaign said their rivals could trigger a dangerous bout of higher prices on a day when Citi warned that the UK faced an inflationary peak of 18.6 per cent, virtually double current levels, by January.

“The reality is that Truss cannot deliver a support package as well as come good on £50 billion worth of unfunded, permanent tax cuts in one go.

“To do so would mean increasing borrowing to historic and dangerous levels, putting the public finances in serious jeopardy and plunging the economy into an inflation spiral.”

UK Conservatives on the leadership campaign trail — in pictures

The row comes before Ofgem’s announcement on Friday when the regulator is expected to raise the cap on energy bills from £1,971 to about £3,600.

The former chancellor’s team also seized on reports that Ms Truss is not planning to ask the independent Office for Budget Responsibility for a forecast ahead of the emergency budget she is planning for next month.

“It’s no wonder they want to avoid independent scrutiny of the OBR in their emergency budget — they know you can’t do both and it’s time they came clean about that now,” Mr Sunak’s campaign said.

Ms Truss’s economic vision and her reported plans for the OBR, which is required to produce two forecasts a year, is coming under increasing attacks from Tory critics.

“The Bank of England’s devastating outlook for the economy contrasts with Liz’s optimism — for her to now prevent the OBR doing proper analysis of the facts would seem to indicate complete loss of confidence in the policy she is advocating," Lord Griffiths, the Conservative peer who served as Margaret Thatcher’s head of policy, said.

Conservative heavyweight Michael Gove warned in an article for The Times that Ms Truss was on a “holiday from reality” with her plans for tax cuts during an economic crisis as he endorsed Mr Sunak.

Mr Gove, who served as levelling-up secretary until being sacked by Boris Johnson before his resignation as Tory leader, said Ms Truss’s vision puts the “stock options of FTSE 100 executives” before the nation’s poorest.

Everything you need to know about Liz Truss - video

Business Secretary Kwasi Kwarteng, a close ally of Ms Truss who is tipped to be her chancellor, insisted there would be fresh support this winter as energy bills soar.

“I understand the deep anxiety this is causing. As winter approaches, millions of families will be concerned about how they are going to make ends meet,” he wrote in The Mail.

“But I want to reassure the British people that help is coming.”

Ms Truss expressed optimism for the economy, saying there is “too much talk that there’s going to be a recession”, as she insisted an economic slump is not inevitable despite the Bank of England's forecast.

Everything you need to know about Rishi Sunak - video

In an interview with the Sun on Sunday, she said she was looking at help “across the board” in a hint that there could be more support for businesses and households.

So far, she has focused on cutting taxes, such as an immediate reversal of the national insurance increased, while Mr Sunak has focused on trying to bring down rising inflation.